The blockchain gaming market has come off the peak of play-to-earn and tap-to-earn games, whose increasing failure rates are due to discrepancies in value distribution, an excessive focus on financial gain, and lackluster gameplay. A brief look at the history of blockchain gaming reveals the factors behind this transition, the lessons learned, and what awaits the gaming niche.
Huntercoin, the world’s first decentralized blockchain game, was developed as an experiment to see how well a blockchain could handle tens of thousands of players shifting around a map. Support was planned for a year, and the development of the game mechanics was less than stellar. The massive multiplayer game was also plagued by bots, making it challenging for human players to compete.
The story wasn’t particularly elegant, either. Humans controlled Hunters, forms of unusual matter in the Chronosius realm, a space with a quirky concept of time and also where players would get huntercoins. The story was essentially contrived to adapt to the mechanics, and, what’s more, the game was taxing on traditional hardware.
The primary objective was to eliminate other players and collect coins on a map, which were then stored in a blockchain wallet. The players’ history and the source of the coins were stored forever on a decentralized blockchain. The game had highs and lows, but players raked in an impressive $1.28 million between the launch on Poloniex in 2014 and March 2019.
P2E blurred the line between work and play
That’s how play-to-earn was born. The pioneering efforts of Axie Infinity facilitated the proliferation of multiple P2E games. At its peak, a million people played Axie every day, with most coming from developing countries like the Philippines, where nearly half of all players were based. However, they were only playing to make money, and the number of daily active users cratered as the token price declined. By the time games like Hamster Kombat had popularized the format, no game was paying out anything significant, more along the lines of $10 for 50 hours of playtime.
P2E gaming emerged as a form of digital labor, blurring work and play. Its emphasis on the financial elements of gameplay, linked to investment-based labor dynamics, volatile cryptocurrency markets, and constant changes to software code, led to uncertainty among P2E gamers. Some scholars cite findings of onerous working conditions, unreliable contractual “employment,” and unstable crypto-linked earnings as examples of the multifaceted aspects of this precarity.
The portrayal of drudge work as supposedly fun gameplay exacerbated labor conditions. Not only did algorithms exert control over players, but so did capitalist-driven forms of community-led organization, informed by the unequal distribution and ownership of in-game assets. Players became prone to burnout, just like anyone performing tedious labor does.
The popular P2E model collapsed as earnings declined and the games struggled to retain users. Complicated wallet setups and other technical hurdles also deterred players, while market oversaturation and volatility made it hard for games to stand out. According to a report, 90% of Web3 startups fail within two years.
Inadequate marketing efforts are also a contributing factor. Many studios rely on organic growth tactics rather than utilizing Web3 behavioral data to achieve personalization and optimize partnerships. Coupled with challenges in measuring lifetime value, this blind marketing approach makes it hard to sustainably build a user base.
Successful projects focus on gameplay; blockchain is only a tool
Successful games like NFL Rivals by Mythical Games are characterized by a focus on gameplay, with blockchain as a tool. Mythical Games is an ecosystem with its own native token, MYTH. It builds play-and-earn game economies with playable NFTs and blockchain technology, empowering not only players but also developers. The platform employs gaming industry professionals who have worked on titles like WoW and Call of Duty. It offers blockchain laypersons a custodial wallet for security, while advanced players can connect their wallets through bridges.
Players own their digital asset collections without having to deal with blockchain complexities. NFL Rivals requires no token to access or blockchain knowledge to play; you just pick up your phone and get started. The main event is the game. Side events include more in-depth uses like trading football stars on the platform’s integrated NFT marketplace. The formula resonates with players, and the game has been downloaded over six million times. The upcoming FIFA Rivals is expected to resonate with soccer fans to the same extent.
Nate Nesbitt, CMO of Mythical Games, said, “Focus on creating great gaming experiences, and you’ll get the player base you deserve. Not because of what’s under the hood, but because of what’s on their screens.”
The fatal flaws of the emission-driven yield approach
Many protocols are still attempting to drive growth through token emissions that promise mind-blowing yields, only to see incentives dry up and liquidity evaporate. Mercenary capital drives some DeFi platforms, creating artificial ecosystems destined to fail. It’s a vicious cycle: launch a governance token, boost TVL by distributing it generously to liquidity providers, enjoy some growth, and then watch yield farmers withdraw funds and move on.
Capital flight, inflationary emissions, and skewed incentives are among the significant flaws of the emission-driven yield approach. Yield should come from sustainable revenue rather than inflationary token emissions. When native tokens are distributed as rewards, their value is diluted to encourage short-term growth, where early adopters extract value, while later users are often stuck with worthless coins. Protocols fail to capture value in the absence of liquidity, making it impossible to invest in long-term security and development.
In the absence of structural incentives for long-term commitment, capital flows to the protocol that offers the best yield at that specific moment. Protocols remain vulnerable to sudden capital flight when liquidity follows opportunistic paths instead of fundamental value.
The play-to-own model offers a promising path forward
With the P2O model, players own NFTs and other in-game items, which also have value outside the game. Mythical Games empowers ecosystem members to own and verifiably trade these items and build collections, with the NFL as an official partner, no less. No other platform is doing that at this time.
The play-and-earn and P2O models have become a prominent alternative to P2E as they resolve issues related to unsatisfying gameplay and game economics. They remove entry barriers and improve access to gameplay, ensuring better prospects for sustainability. Play-and-earn games don’t rely on dedicated or skilled players to drive revenue. Their makers invest in thrilling and creative stories and engaging gameplay experiences, which are universally appealing instead of contrived to fit game mechanics or limited by an unimaginative objective.
A final and significant differentiator between P2E and play-and-earn is the utilization of assets. The P2E model encouraged players to exchange their in-game assets for cryptocurrency, which they could use for real-world purchases. On the other hand, play-and-earn encourages them to use earnings to upgrade their digital assets.
